|Robert Zoellick, outgoing World Bank president and Christine Lagarde, IMF managing director, attend their Development Committee press conference April 21, 2012 at the World Bank in Washington, DC. |
The International Monetary
Fund (IMF), received pledges of more than $430bn by the end of its semi-annual
ministerial meetings in Washington DC at the weekend, to
reinforce the Eurozone's anti-crisis firewall, while setting its sights on rekindling growth, restoring
confidence, and creating jobs to put the global economy on a sustained recovery
Up to Friday, the IMF had
received pledges of €150bn (about $200bn) from the Eurozone, $60bn from Japan
and $15bn each from South Korea, Saudi Arabia and the UK. Other donors include
Sweden, Switzerland, Norway, Poland, Australia, Denmark, Singapore, the Czech
Republic, China and Russia. The US and Canada did not contribute.
As the combined lending ceiling of the ESM (European
Stability Mechanism), which will become operational in coming months, and the
European Financial Stability Facility will be raised to €700bn and according to
Olli Rehn, the European commissioner, the total available from the Eurozone is
close €800bn or $1tn, together with the IMF's firepower, there would likely be
enough available to bailout Spain.
Jim Flaherty, Canadian finance minister, said
last Thursday that there should be separate votes by European and non-European
nations at the IMF with regards to dealing with the Eurozone's debt woes.
Flaherty, who said the IMF has "adequate" resources to deal with any "imminent"
problems in Europe, said the Fund has "governance issues."
"Because of the large number of European seats on
the board of the IMF, some of us -- and Canada certainly -- (are) of the view
that we ought to have two keys in effect, that we would have one vote by the
Eurozone countries and another vote for approval by the non-Eurozone countries
when we're dealing with this particular issue," Flaherty told reporters after
participating in a panel discussion.
The Financial Times says today in
an editorial that the IMF must insist on programmes that are actually likely to
work. "If the Eurozone cannot ensure that, the IMF should dare to walk away."
Tharman Shanmugaratnam, Singapore's finance minister, who chairs the
International Monetary and Financial Committee (IMFC), said ministers and
central bank governors gathered in Washington focused on the “real sustainable
solutions to this crisis that the firewall is meant to support.”
Calling the strengthening of the global safety net an “important step
forward,” he told reporters that the main emphasis must remain on fiscal and
structural reforms to put economies on a firmer footing. While getting budgets
and debt under control was important, it was equally important to spur growth
and get it back to normal levels within 2–3 years. Without growth, fiscal
sustainability was not possible.
Christine Lagarde, managing director of the IMF, said the spirit and dynamic
of the IMF-World Bank Spring Meetings amounted to the “Washington moment” that
she had been seeking to drive forward a collective solution to the crisis.
The Group of Twenty (G-20), along with the IMFC, on March 20 announced
collective pledges of more than $430bn to the 188-member IMF—doubling its
lending capacity—to help build confidence and prevent crises from spreading.
Although the global economy is slowly improving again, the IMF has said in
its latest World Economic Outlook (WEO) report that growth this year is expected
to be weak, especially in Europe, and unemployment in many advanced economies
will stay high.
Although action by policymakers in Europe and elsewhere has helped to reduce
vulnerabilities, risks of a renewed upsurge of the crisis in Europe continue to
loom large, along with geopolitical uncertainties affecting the oil market.
Since the start of the global economic crisis in 2007, the IMF has committed
more than $300bn in loans to its member countries. In response to the
crisis, the IMF also reformed its policies toward low-income countries and
quadrupled its concessional lending.
Tharman said he saw a courageous and strong resolve to tackle the difficult
issues of competitiveness, debt, and thrift and build a better future. “We know
it’s going to be a long road and a multiyear journey; there will be pitfalls
along the way which is why Christine’s umbrella is extremely important,” he said
referring to the additional pledges to the IMF.
“It’s a very challenging journey, with politics intersecting with economics.”
communiqué, the IMFC reaffirmed “the urgency of making the
2010 quota and governance reforms effective by the 2012 Annual Meetings to
enhance the Fund’s legitimacy and credibility.”
The 24-member IMFC urged member countries to ratify the reforms designed to
give a larger say to dynamic emerging markets and preserve the voice of poorer
The communiqué emphasized that global collaboration was the key to ensuring
stability and rebuilding growth around the world.
The IMFC called on members to complete a financing package for low-income
Group of 24, which represents developing countries, said in a separate
communiqué that they would focus on job creation and social safety nets that
protect the poor and vulnerable. They said they were worried by a drop in
official development assistance to poorer countries.
At the joint World Bank–IMF Development Committee, delegates said April 21
that growth in emerging and developing economies continued to be relatively
strong but poor countries still need support. “Implementing policies and
structural reforms to promote poverty reduction and inclusive growth must
continue,” the committee
Outgoing World Bank president, Robert Zoellick, stressed the need for boosting
employment and protection for the poor. But he said the “best safety net is a
job.” Ministers and central bank governors congratulated Jim Yong Kim on his
selection as the next World Bank president.
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